Planning International Pricing Decisions

Planning internationalist legal injury DecisionsOutline and discuss the of import factors a merchandising firm would take for to take into account when planning international pricing endings. (50% of the available marks for this question)IntroductionMany organizations emphasize that equipment casualty is the most independent, versatile yet convenient fraction of marketing mix. Pricing plays a primary(prenominal) presidential term agency in the international marketing and implementing effective marketing strategies. footing is whizz of major part of marketing mix. This is chiefly based on the fact that pricing changes appear rapid and immediate in the market. Too many managers date pricing decisions very challenging and often difficult to make. This is in conjunction due to the fact that most of the modern organizations believe and know the upshotance of the strategical role of pricing in international marketing.For many small companies operating in local markets, pr icing decision are based on the tellingly straight forward for allocating the total estimated make up of producing, managing and marketing a harvest-festival or service in the midst of the fore cast total volume of sales, and adding an becharm receipts margin. Such as fluctuation in exchange rate, acceleration inflation in certain countries and the pulmonary tuberculosis of alternative payment methods such as leasing, exchange and counter- shell out. For these reason, it is authorised to know at the outset that development and implementation of pricing strategies in international market should follow the following stages.Analyse the factors which bow international pricing, such as the cost structures, the value the crossroad, the market structure, competitor pricing levels and a variety of environmental constraints.Confirming what impact the corporate strategies should substantiate on pricing policy.Evaluating the various strategic pricing option and selection the most appropriate approach.Implementing the strategy through the social occasion of a variety of maneuver and procedure to set the prices at small transmission line unit level.Managing prices and financing international transaction.The factors effecting international pricing include followingCorporate and marketing objectives insurance policyFirm and product poisoningProduct range, life cycle, substitute, product differentiationMarketing product developmentAvailable resourcesInventoryShipping costPricing objectivesThe pricing decisions in general fucking analyse and viewed by two ways pricing as an achievement of marketing objectives or pricing as a fixed element in a business decision. If the previous view is followed, the family uses price to achieve a specific objective. Pricing decision should be consistent with the marketing objectives of the firm in a particular market as well as the all all overall policy of the company.Price escalationPrice escalation is defined as changes in the price of specific goods or services in a given economy over a period of time. excess profits do experience in some international markets, but generally unequal differences in price between the exporting arena and importation estate. Shipping from unrivaled plain to an some other country the cost arises specifically, the term relates to situations where ultimate price are raised by shipping costs, insurance, packing, tax. The majority of this cost arise as a direct result of moving goods across borders from one to another country and join to escalate the final price to a level signifi offert higher than local market.CompetitionThe nature of market structure in particular is an important determinant of price. It refers to the number of competing firms, their size and relative position. In the issue of an oligopoly structure, the entering firm would prolong little freedom to choose a price depending on the income levels, a certain market fecal matter takes only a cert ain level of pricing . A company can as well as use competitors prices as a bourn for poisoning its product as compare to competitors for example, if it wants to poison its product as being of higher quality than its competitors. When a company entering in to a market and using competitive prices, a company needs to check on the cost structure of its competitors. Price is just one of the element of marketing mix and has thus to be matched with other element of it.Pricing controlsCompanies doing business in contrary countries encounter a number of different types of cock-a-hoop medication price setting. To control prices, government whitethorn establish margin, set prices and floor or ceiling, restrict price changes, compete in the market great subsidies or act as purchasing of monophony or selling monopoly. A company entering of entering a outside(prenominal) market with a acumen strategy with a lower priceTarget CustomerMarketers shit to calculate and understand a particula r portion or target client group in the market that they are entering. Knowledge of demand elasticity the price is vital, as is knowledge of how customer will react in the case of price change. But with differentiated product, market share of a company can even be improved through higher prices. Brand names and image of high quality are two of the factors that characterise differentiated product that can be sold at the quality prices.ReferencesChris Philips, Isobel Dooley and Robin Lowe, International marketing strategy, Pg 420,421Ghauri and Cateora, International marketing 2nd Edition, Pg 442 452Discuss the causes of and solutions for twin imports and their effect on price. (50% of the available marks for this question)IntroductionParallel import is a non- exaggeration product imported from another country without the permission of the intellectual property owner. Parallel imports are often referred to as grey product, parallel imports develop when importers profane products fr om diffusion in one country and sell them in another distribution which are not part of the manufacturers regular distribution system. Parallel imports are legitimately produced goods imported legally into a country without the authorization of a look atmark, copyright, or patent holder. This practice is lucrative when wide margins exist between prices for the said(prenominal) product in different countries. For example the price of a Volkswagen car is in Germany showroom is 107.4 and in Spain that car price is 102.6 the same in France 103.9 and in UK 130.9. A variety of conditions can create the profitable opportunity for parallel imports in the market.Causes of Parallel importsThere are several causes of parallel imports includingFluctuation in currencies valueRestricted import quotasHigh taxPrice differentialsRestricted supplyThe possibility of parallel imports occurs when the price differences are great than the cost of transportation between two markets. In Europe, because of different taxes and competitive price structures, price for the same product vary between countries. The variation in the value of international currencies between countries frequently get outs to condition that make parallel imports profitable.Restriction brought about by import quotas and high tariff can lead to parallel imports and make illegal imports attractive.ExampleIndia has a three-tier duty structure on computer spare parts ranging from 40 to 70 percent on imports. As a result estimates are that as much as 30 percent of India domestic computer hardware sales are accounted for by grey market.Purposefully restricting the supply of a product in a market is another practice that causes abnormally high prices and thus makes a parallel market profitable. Such was the causes with Mercedes-Benz cars whose supply was limited in the coupled States. The grey market that involved in Mercedes cars was partially supplied by Americans returning to the United States with cars they c ould sell for double the price they had paid in GermanyPossible Solution of parallel imports is as followReduce the price differentials between marketmaterially alter the productEducate the dealerTerminate the dealer agreementBuy back the grey market goodsThis is not strange for companies to find them egotism competing in one country with their own product imported from another country at lower prices. Most probably such prices differentials will forsake to exist once all restrictions to trade are eliminated in the Europe union and a full fiscal union is achieved. To prevent parallel markets from develop such marketing and pricing strategies are use, companies must maintain strong control systems. These control systems are difficult to maintain and there remains the interrogative that some companies are less anxious with controlling grey markets than they claim.Price Changes due to parallel importsThe parallel imports have a negative effect on the original product. much or les stimes grey market upset prices level and result from ineffective management and lack of control, observed evidence shows that the treats of parallel imports do reducing retail prices. In itself, these price effects are not enough to justify a free organization concerning of parallel trade..The possibility of parallel imports occurs whenever price differences are greater than the cost of transportation among two markets, and the price of product are higher in domestic than neighbour countries.ExampleJapanese merchants have long maintained very high prices for consumer. As a result, prices for Japanese product sold in other country as lower price than they are in Japan. For example, Japanese can buy canon photographic cameras from New York catalogue retailer and have them shipped to Japan for a price below that of the camera purchased in Japan. In addition to the higher prices for product at home, the rising value of currency makes these price differential even wideReferencesMarke ting across Cultures 5th Edition Jean-Claude Usunier and Julia Anne Lee Pg 297 198International marketing strategy by Chris Philips, Isobel Dooley and Robin Lowe chapter 11 page 436,437)Question 4.Distinguish and explain the differences between tariff and non-tariff barriers to trade. What strategic options are open to marketing firms when attempting to deal with the problems of non-tariff barriers in economically developed and industrialised countries? spot at least one industrialised country to illustrate the points made..Introduction responsibilitys have always played an important role in generating revenue for the country. In most of the under developed countries, tariffs plays an important role in developing the economic policies of the country. For political reasons, tariffs are applied on imports, but sometimes they are similarly applied on exports. It is generally the easiest rebound of revenue generations.When a shipment comes on the border of the country, the custom off icers analyze the products and charge tax on it on the basis of the formula. Since the goods cannot enter in the country without the written authorization of the tax authorities, thus it is very easy to collect the duty.Nowadays the free trade organizations discourage the tariffs applied on the goods. World trade organization (WTO) has played an important role in persuading the countries in reducing the tariffs imposed. But nowadays countries are more focused on the non-tariff trade barriers. These barriers are imposed on countries which do not comply with the guidelines laid down by the world trade organization.Tariff barriers to tradeTariffs are the restrictions imposed by the country on the imports and exports of goods and services. Tariffs have always been used as an instrument to increase the revenue generation and also to protect the local industry from the alien competition.There are different types of tariffs which can be imposed by a country but the most common one are as follows.Ad valorem it is set on the basis of the percentage of the value of the products being imported in to the country. But sometimes it isnt that useful because if the international price of the commodity decreases, than the tariff applied on it also reduces.Specific tariff it is the specific amount of money that imposed on a product. Thus if the price of the product decreases than it does not affect the tariff.Revenue tariff this benignanthearted of tariff is imposed specifically to stick revenue for the country. E.g. if a country does not grow coffee, than the government can impose a duty on the import of coffee beans to generate revenue.Prohibitive tariff this pleasant of tariff is imposed to restrict the import of a specific product. Usually the tax imposed is so high that it is almost impossible for the companies to import or export the product.Protective tariff this kind of tariff is imposed to specifically protect the local industries from the external influence. Al l the governments use this option to facilitate the local industries from the foreign competition.Environmental tariff this kind of tariff is imposed on the imports and exports to the countries which have substandard environmental controls. These kind of tariffs are also known as eco-tariffs or green-tariffRetaliatory tariff this kind of tariff is based upon revenge. E.g. if United States impose a tariff on Chinese imports than the mainland China will also impose a tariff on the imports from USA. Sometimes countries use this option to influence the tariffs imposed by other countries.Non-tariff trade barriersNon-tariff trade barriers are the types of barriers which are imposed by a country to restrict the imports but they are not like the usual tariff barriers. Some common examples of the Non-tariff barriers are anti-dumping measures and countervailing duties.The use of non-tariff barriers have significantly increased over the knightly few years because of the work done by World Tra de Organization (WTO) to reduce the tariff barriers imposed by different countries. Some Non-trade barriers are permitted in limited hatful, especially when it is required to protect health, safety, sanitation or natural resources. But generally it is criticized because it violates the free trade rules set by the Worlds Trade Organization (WTO), the European Union (EU) and North American Free Trade Agreement (NAFTA).Examples of Non-tariff BarriersThe most common examples of non-tariff barriers are as follows.General/product specific quotas.Products standardsBan on importsPackaging conditionsLabelling conditionsRules of originAdditional trade certificates like Certificate of origin, Certificate of Authencity.Dealing with the Non-tariff barriersWe are living in a very competitive environment. All the companies in the world are working hard to have a competitive edge over each other. Tariff and Non-tariff barriers play an important role in achieving the overall goal of the company in the foreign and domestic market. If a company wants to enter into a foreign market, it has to develop a strategy to enter into the market and makes profit. Governments use the Non-tariff barriers to facilitate the local industry from the foreign competition and also impose duty on their products to generate revenue.China has been one of the fastest growing economies in the world. For the last three decade, chinas economy has grown at approximately 10 percent per year. The main reason of chinas success is that it has dramatically penetrated into the foreign market while protecting its local industry. Most of the western countries and independent think-tanks blame china for manipulating with its currency and use cheap labor to boom it exports. China has very strict barriers on imports. A company has to go through very strict procedure to beautify into the local market.(http//www.iie.com/publications/papers/lardy0507.pdf).China has imposed a lot of Non-trade barriers on the imports fr om the foreign countries. This has played an important role in developing the local industries. The Chinese government has helped the local industry to improve its efficiency by giving them financial and tax relief. The imports from China have drastically affected the American manufacturing industries. Although the imports from China has significantly increased in US but US exports isnt catching up at the same ratio. This has caused a huge trade deficit between the US and Chinese trade. Now USA has imposed anti dumping tariff on Chinese products.Recently the US international trade flush has ruled that the Chinese imports are hurting the American firms by selling the oil well pipes at a very low rate. Thus the Chinese steel pipe producers will face anti dumping tariffs of up to 99.14 %. This type of tariff barrier is called protectionist barrier. This kind of move can damage the blood between the countries. (http//www.e-to-china.com/tariff_changes/data_tariff_changes/2010/0505/7801 7.html).The request for protection imports have significantly increased during the 2009. Many countries are targeting Chinese producers/exporters and trying to limit the imports from China to help their local industries to grow.(http//www.e-to-china.com/tariff_changes/data_tariff_changes/2010/0505/78017.html) closingTo conclude we can say that non-tariff barriers play an important role in the revenue generation of the country. Most of the countries use tariff and Non-tariff barriers to protect their local industries and also to generate revenue. The most common type of Non-tariff trade barrier is protectionist barrier. Governments use this option to protect their local industries from the foreign competition.Tariff has been used by countries to generate revenue but sometimes it can also be used for political gain. Some countries can use these tariffs to unfairly restrict the imports from certain countries for own(prenominal) reasons. Thus World Trade Organization played an importan t role in persuading the member nations to reduce the tariffs.This move has not only encouraged the trade between the countries but also helped in increasing the friendly relationship.Referencehttp//www.bea.org.mk/Upload/Content/Documents/Report%202007%20NON-TARIFF%20BARRIERS.pdfhttp//en.wikipedia.org/wiki/Tariffhttp//www.e-to-china.com/tariff_changes/data_tariff_changes/2010/0505/78017.htmlhttp//www.fas.org/sgp/crs/row/RL31403.pdfhttp//www.card.iastate.edu/publications/DBS/PDFFiles/06wp438.pdfQuestion 5.Q5 under what circumstances might an international marketing firm consider using sound out ventures to exploit business opportunities within a big emerging market (BEM)? Choose a particular product or service industry and a specific BEM as a vehicle for discussion.IntroductionInternational operations have become one of the most integral part of a businesses and all the organizations adopt different strategies to penetrate into the foreign market. The success of an organization depe nds upon how well it has still the market situation and modified its strategy accordingly. All the foreign markets have a unique try and opportunities. Thus the companys main goal is to minimize the risk and explore the opportunities to attain the overall goals and objectives of the company. Thus the most commonly used strategy to enter into a foreign market is Joint Venture.A joint venture is an arrangement where two or more firms join forces for manufacturing, financial and marketing purposes and each has a share in both the equity and the management of the businessThere are many ways to approach a business opportunity in the market but Joint venture is considered to be the most appropriate and less risky. However one needs to analyze the advantages and disadvantages of joint venturing before entering into the relationship.When a company enters into a market, they make a series of contractual relationship with the local business by either licensing or distribution agreement. The main pull ahead is the parent company has limited desegregation with the local companies. They only pay them a limited amount of money but do not share profit. However if the company wants a more dynamic relationship, than it can form equity joint venture, so that both can work together to increase the favourableness of the company, and also share the profit and loss together. emoluments and Disadvantages of Joint VentureThere are many advantages and disadvantages of having a joint venture. On one hand, it enables a company to outsource it operations to other companies to reduce its overall cost, but its also very risky. The main risk is the ability and willingness of the other company to follow the guidelines and procedure laid down by the company.Capital requirement payoffOne of the most important advantages of having a joint venture is that the financial resources can be shared. E.g. A Company may be interesting in opening a business that requires a significant amount of money . Although it might have the required labor and technical resource but it doesnt have the financial capacity to fund the project. This kind of project is a good candidate for a joint venture. To start this project, the company can look for other companies which can share the financial cost to start the project.DisadvantageThe most obvious disadvantage of having a joint venture is that the companies have to share their profits generated from the operations. A lot of issues can arise from this aspect because both the companies are not only sharing financial resources but they also share some technical know-how and intellectual property rights. These types of resources are difficult to value thus it can create some misunderstandings between the companies.Reduction of business riskAdvantageA joint venture allows the investor to turn its risk. The most important way of reducing the risks faced by the investor in the market is to diversify its portfolio by investing in different markets. Another advantage of joint venture is that when a company collaborates with a local firm than it can benefit from its local knowledge. The main risk that a company can face in the foreign market is the little knowledge of local needs.Economies of scaleAdvantageOne of the most significant advantages of joint venture is achieving economies of scale for both companies. E.g. if the manufacturer gives the contract of sales and distribution to its local partner, it can focus mainly on bringing the product to its local partner. With proper planning, joint ventures can efficaciously reduce the cost associated with the product from the production to the end user.Control over Functional activitiesAdvantageIn joint ventures, the companies can also have a more dynamic relationship with each other by giving direct access to each others processes. E.g. a company can reduce its manufacturing cost by giving the production contract to the local company, but kind of it can also seek a way to have s ome control on the manufacturing and production process of the local partner. Thus the foreign company can benefit from the local companies knowledge about the market and they can also share their business practices to strengthen their relationship.Sharing technology and management skillsAdvantageIn joint venture, both the companies can share their expertise to improve the overall efficiency of the business. The main advantage of having a joint venture is that the foreign company can learn from the experience of its local partner about the local market. And the local partner can also take benefit from the foreign company to improve its technical and managerial skills. Both companies can share important information regarding their businesses to strengthen their relationship.DisadvantageAlthough sharing technology between the businesses can be a good idea, but sometimes the practices learnt from joint ventures can be used beyond Joint venture in other business. This is the main factor that discourages the companies to form joint ventures.Joint venture in Big emerging marketInternational operations are one of the most important part of business strategies of the company. As the world has become a global village, the companies are faced with an intense competition and thus companies are continuously in search of exploring new market opportunities.Joint ventures have become an integral part of the businesses. Most of the big brands in the industry had joint ventures in past with other companies which helped them to increase the profitability.China is one of the largest economies in the world. Its products are exported all over the world. It has enjoyed approximately 10 percent growth rate for the 3 decades. It is one of the biggest exporters to United States. Chinas market is considered to be the best emerging market in the world and most of the big names have already entered into the market. These companies have effectively used the local companies and utilized th eir knowledge to increase the profitability of the companies. General Motors, Toyota, Motorola, IBM etc have affectively used joint venturing to reduce their production cost and increase the profitability of the companies.Chinese has significantly gained a huge market share in the telecom industry. Mobile phone giants like Apple, Motorola, Siemens, and Sony Ericson all operate in China. They tack their products in China to enjoy cheap labour and manufacturing cost.ConclusionTo conclude we can say that joint venture is one of the most important tools used by the companies to improve the productivity and profitability. It helps the foreign companies to enter in to a foreign market with the help of the local knowledge. Thus both the companies can use utilize each others resources to increase the productivity. In this way, the local companies can learn from the international business practices and managerial skills of the foreign company and the foreign companies benefit from the local knowledge of the local company. Although there might be some complications involved in joint venturing but if both companies work together, they can easily pass any challenge.